Enterprise Software Is Sexy Again

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This guest post was written by Aaron Levie, CEO and co-founder of Box.net. Box.net was founded in 2005 with the goal of helping people and businesses easily access and share information from anywhere. Box.net is now used by millions of individuals, small businesses, and Fortune 500 enterprises worldwide.

When we think of sexy technologies, enterprise software usually ranks somewhere between the fax machine and a Zune. With prohibitive pricing, long product cycles and user interfaces only a mother could love, the enterprise offerings of Microsoft, SAP, Oracle and other big vendors are about as appealing as Steve Ballmer in a bikini. Not surprisingly, entrepreneurs and venture capitalists have been turned off by these unappealing traits, the near-monopolies held by big players, and the suspicion that problems being solved for the enterprise are less exciting. After all, if you want to rapidly develop and release technology to millions of users, build an agile and innovative company culture, and perhaps break a few rules along the way, you certainly don’t build software for the enterprise. You build Facebook, Foursquare, Twitter, YouTube or Blippy.

Given all this, why have I decided to go down the road of building a hard-core enterprise software company? It’s simple. Enterprise software is sexy again. Just ask consumer tech guru Marc Andreessen, who recently confessed to being attracted to the new wave of enterprise software companies, or Peter Thiel, who thinks Palantir is hot to the tune of a $750M valuation.

Palantir is like the Jack Bauer of business software, helping to prevent terrorism and predict the spread of infectious diseases. Fortune 500 companies use Box.net to collaborate on billions of dollars in transactions, streamline national advertising campaigns, and help build new space shuttles (seriously, space shuttles). Cloudera is helping big businesses solve their biggest data challenges. Jive is building a meaningfully large business by bringing social into the enterprise, and just raised another $30M to do so. Zuora is reinventing customer subscriptions and payments, and has quickly grown to manage more than $1 billion in subscription revenue. These companies – along with Workday, PBWorks, Asana, Rypple, Salesforce, and dozens of others – are tackling big problems and even bigger markets, placing a premium on innovation, and building cultures around product execution rather than pure sales. And by doing so, they’re making enterprise software sexy (yes, I’m going to use this word a lot in this post, prepare yourself).

Big Problems, Large Markets, New Scale

Enterprises today have massive amounts of information to analyze and manage, disparate employees to connect, prospective customers across the world to market to, and business problems that need to be solved in real-time. Buyers across businesses of all sizes are on the prowl for better, sexier technologies to address these challenges, and collectively they have hundreds of billions of dollars in budget. The US government alone will spend nearly $80 billion next year on information technology. Compare that to a $24.2 billion pie for all of US internet advertising, the revenue stream for a large portion of web companies. New enterprise software companies are emerging to address problems that didn’t exist (or couldn’t be solved) a decade ago, and those with the most efficient and effective solution are being rewarded greatly.

These newcomers wouldn’t have stood a chance against the behemoths in the client-server paradigm, but the cloud is an inherently democratizing force, removing any unnatural channel, sales, or distribution advantages from providers. With the cloud, every user within an organization is a potential buyer – not just because their usage of your service determines your success, but because more and more we’re seeing bottom-up adoption of technology displacing top-down deployments. New enterprise services that leverage a freemium business model can operate at internet-scale, growing to millions of users as rapidly as the latest hip consumer application. Just look at Yammer, which is doubling revenue every quarter. Startups now have an unprecedented opportunity to disrupt traditional enterprise vendors.

Massive Innovation in the Enterprise

The latest crop of enterprise software companies are approaching business problems with the agility, speed and mindset of consumer startups, bringing explosive innovation to a traditionally stagnant, slow-moving market. To retain customers in this incredibly competitive landscape, you’re forced to build better technology – technology that customers love, is easy to implement and available across devices. It’s Moore’s Law on steroids, forcing you to constantly innovate and improve your technology at an unprecedented pace. At Box, we push updates that are incremental and sometimes monumental every week without interruption to our users or their IT departments, unlike SharePoint’s three-year release cycles and occasional patches that place the burden on the IT staff.

How is all this innovation translating to how users and businesses operate? Enterprises are now getting a real-time, holistic view of content and conversations within their business through activity feeds from Salesforce, Yammer, Jive and others. They’re experiencing more seamless interaction between the desktop and browser with HTML5-powered content viewing and editing, and drag and drop uploading from Google, Scribd, and more. They’re realizing the long overdue promise of the “mobile workforce,” thanks to sophisticated business applications that let them collaborate and communicate from mobile devices and the iPad. There’s more ground-breaking innovation going on in enterprise startups today than most of the consumer web; we just don’t see it because we’re conditioned to think enterprise software is dull.

Culture and Execution Matter More Than Size

Not surprisingly, company culture at these new enterprise software contenders looks a lot more like their consumer counterparts than the enterprise behemoths they’re attempting to disrupt. Rather than trying to build aggressive sales teams, many enterprise software startups are focusing on product execution as the best means of acquiring customers. The days of “elephant hunting” are quickly disappearing (it always seemed strange to associate customer relationships with killing large and mostly-friendly mammals, but what do I know?). Consumption and subscription-based billing, in contrast to the traditional licensing model, forces vendors to build amazing software that your customers need and use, not just software that you can sell better than anyone else. In today’s world, you only get paid if people are using your product.

Furthermore, without the hooks of costly infrastructure and rigid licensing, scaling in size is no longer an excuse for slowing down. In the highly democratized, competitive world of the Web, companies that let their bulk get in the way of innovation and user experience will quickly see a customer and employee exodus. Salesforce is sexier today having passed the $1B annual revenue mark than it was a decade ago because it has continued to innovate and build a culture around its core mission: “The End of Software.” SuccessFactors has aged gracefully to become one of the leading SaaS cloud companies by executing against five founding principles that include “No Jerks!” NetSuite, Taleo, LogMeIn and SolarWinds have also managed to maintain their sex appeal through recent successful IPOs. Others like Cast Iron and Greenplum have been snapped up in a recent wave of acquisitions as giants like IBM and EMC try to spice up their images and offerings.

So how can today’s business software vendors, as they grow, see similar success?

1. Make customers feel like they’re a part of your company — all enterprise vendors could all learn a little from Zappos
2. Align revenue with customer success and consumption — your product isn’t worth anything to someone who isn’t using it
3. Build usable technology that people are excited to experience every time — this is hard to do and easy to forget
4. Move quickly, stay youthful in approach, and innovate — complacency is the surest way to lose great talent and your best customers
5. Solve an enterprise’s big problems — the bigger the problem, generally the bigger the reward.

We’re going through a major shift in the technology landscape. Yes, photo sharing is fun, but the upside of creating the eighth service that lets you post photos of yourself to the web is becoming smaller than solving massive problems for enterprises. Organizations have unprecedented amounts of data, global and virtual workforces, and markets that change in real-time. It’s easier and more compelling than ever before to build, launch, and sell scalable enterprise solutions. There are billions of dollars to be made just by keeping it (don’t hate me) sexy.